Marin Katusa, senior editor of Casey Energy Opportunities,
spoke at the Casey Research/Sprott Inc. "
When Money Dies
" Summit and named the companies he sees as the best
opportunities in the energy sector today. In this excerpt from
his remarks, he gives background, warnings and targets that could
help any investor trying to make money in energy.

The goal today is to try to make money, and the key word is
"trying." If you think that companies can't get cheaper, you may
want to think again. Everyone always talks about November 2008 as
the depths of the stock market collapse, but that wasn't the low.
The low was actually March of 2009. So be aware of the dangers of
trying to catch a falling knife. Even a multibillion dollar
market cap company can lose more than 40% of its value in three
months. So be careful.

People talk about peak oil, but there is also peak government
take. How much more can the governments take? Look at Libya; it
was taking more than 97% of oil proceeds. In Iraq, it's somewhere
north of 92%. A company, after taking on all the exploration
risk, gets about $4 for every $80 per barrel (bbl) in Iraq.
That's a high government take. The risks are there.

Another thing you have to be careful of is that in some of the
old deposits in Saudi Arabia, they are injecting a lot of water.
The black swan in the oil sector could come in the form of
technical difficulties. These deposits were found back when Elvis
was at the top of the hits, so there is a risk that they could
cave in, decrease production from these old fields and send oil
soaring +US$200/bbl.

Also, look at places like Kuwait. America defended the people,
but when I was there in December, I found that the American
companies don't get any of the oil. The foreign oil companies can
only get service contracts. Remember that 30 years ago one of
Canada's most famous and well-loved prime ministers, Pierre
Trudeau, nationalized the oil sector. Would it be a shock today
if nationalization happened in other countries? That's another
potential black swan. So, there are a lot of risks out there in
the market. I think you are going to see equity asset deflation,
which means these companies are going to get cheaper. I don't how
low they will go, but using the lows of '09, I have come up with
a few targets and some angles on how to play the
sector.

Oil Sands

There are two types of projects in the oil sands: open pit and
steam-assisted gravity drainage (
SAGD
). Major production currently is coming from the open pit. These
are the big massive holes utilizing more than 300-ton trucks, the
largest shovels on the planet. It is a very high-cost
exploration. The attraction of a SAGD project is you don't have a
big pit. You don't need all those big trucks. But production
isn't coming the way people have planned. This is really
important to understand.

So, why are the oil sands such a major part of the American
energy solution? The Americans get more oil from Canada than any
other trading partner. The planned Keystone Pipeline expansion
would carry Canadian crude oil from Alberta to Texas and deliver
almost twice as much oil to the refineries on the Gulf Coast than
the 465,000 barrels (Kbbl)/day Iraq is sending. Mexico's exports
are declining; it will soon be a net importer. Saudi Arabia is
declining at more than 3%. In Venezuela, Chavez is using most of
the oil to balance his budget. That is why the oil sands are
important-they are a secure, friendly source of oil for
Americans.

Companies that already have production need around $45-60/bbl
oil to break even. Any new production from the oil sands is going
to be north of $80/bbl. But big oil sands companies with existing
production can be very profitable at that price. And this is why
I propose it as a solid opportunity.

The Top Five Oil Sand Producers:

Suncor Energy Inc. (SU:TSX.V; SU:NYSE)
was trading at a 52-week high of $46/bbl. It's trading
around $32/bbl now. Its price-to-earnings ratio (P/E) is 13.
What is more important is it is producing more than 300
Kbbl/day. It has a capacity to about 900 Kbbl/day. That is well
over twice what you get from Iraq. It could go to $20; I would
really line up to buy this stock at that price. In the
meantime, I would put in a buy at around $22, I would sell a
put, collect about 4-5% by February and if it goes to $22, I'm
happy owning Suncor at $22. But if it doesn't go to that point,
I collect about 4.5% by February by selling a put. Remember,
volatility is your friend. So is it possible that a stock that
is Canada's largest oil company could go from $46 to $20?
Without a doubt. It could go to $15. If oil goes down to $40,
Suncor doesn't make money. That's really important to
understand. The oil sands are a stable, secure reliable
production of oil, but it is very high-cost oil. So be careful.
I wouldn't jump in and buy my 100% desired allocation today. I
would nibble. It's appetizer time. If, in six months, we are
wrong and things get corrected, I'd probably sell because I
don't think the American economy can handle $100/bbl oil. In
the long run, I'm very bullish on the price of oil, but in the
near term, I'm pretty bearish. Other big oil sand producers
are:

Royal Dutch Shell Canada's (RDS.A:NYSE;
RDS.B:NYSE)Cenovus Energy Inc. (CVE:TSX; CVE:NYSE)
is one we have had a good win with in the newsletter. I am
going to propose now that you take profits on Cenovus mainly
because it has not been hit as significantly as the others. Its
P/E is trading well over 25 times. So if it came down to it, I
really like Cenovus, but I think you are going to have a bigger
upside owning Suncor at my recommended buy price than holding
Cenovus today. The problem with Cenovus is the SAGD. We've had
a big win with Cenovus, but it's time to sell Cenovus and look
at getting into Suncor at C$22/share.

Green Energy

Geothermal has been the most disappointing sector of my
career. What went wrong? I have asked myself this every day. I
call
Ormat Technologies Inc. (ORA:NYSE)
,
Alterra Power Corp. (AXY:TSX)
,
Ram Power Corp. (RPG:TSX)
and
Nevada Geothermal Power Inc. (NGP:TSX.V;
NGLPF:OTCBB)
the Unfantastic Four. They were undercapitalized, but when
we looked at the value, the cash flow models, the Power Purchase
Agreements, it was very seducing. These things were so cheap on
paper, but because they were undercapitalized, management wasn't
able to truly execute the business plans. Ram Power had massive
value in the P90s (90% Probable), but major drilling problems.
Nevada Geothermal built a $200M plant that cost more than
planned-lack of execution. Then production was less than planned.
A lot of things went wrong.

What is next? What's going to happen in this sector?
Consolidation. You are going to see all these geothermals come
together. They are going to have to bite the bullet and realize
that they have to do something, namely merge. You will possibly
see a North American geothermal company and an international
geothermal company. Now, why do I think this is important? An oil
company can handle the large financial expenditures. Drilling is
very expensive. You can't just drill two or three wells. You need
to drill 10 wells in that one region vs. the one that has been
happening up to this point. Someone like BP or Exxon can afford
to do that expanded drilling for promotional reasons to say, "We
are the world's largest geothermal producer." That is what is
going to happen.

But where is the upside? These companies are going to get
cheaper before it gets better. You are going to have tax loss
selling. Look at Ram Power and Nevada Geothermal, a lot of
selling pressure will come during tax loss season. I would wait
until the tax loss selling comes, if you want to buy on
weakness.

Solar and Biofuel

I just don't think that they are going to fly, as investments.
The 2013 Department of Energy grant program is going to be
changed. The government doesn't have the money for this even
though Obama says by 2030, 80% of electricity generated in
America will be green.

In the wind sector, you may want to look at Sprott Power and
Alterra Power. Let's face it. Ross is the king of the green
sector right now when it comes to the juniors. He has the cash.
He can also go out and raise the money based on his past
successes. Nevada Geothermal can't, and I don't think Ram can go
out and raise the money that it was able to do three years ago.
AXY will be the consolidator in the junior geothermal sector.

Uranium

When it comes to uranium, grade is king. The Athabasca Basin
is the highest-grade uranium production on the planet, but you
need access to a mill. Last summer, we published an alert
on
Denison Mines Corp. (DML:TSX; DNN:NYSE.A)
at $1.20 and it went to $4 and change; we told you to sell,
and it's now a Casey Free Ride. Hathor was also a very big win
for our subscribers. Now we only really have
Cameco Corp. (CCO:TSX; CCJ:NYSE)
left. It's still the world's largest pure producer of
uranium. I would look to buy under $18, if you really want to be
savvy and patient, under $15.

The uranium sector is not dead. It is only going to get
better. Why? Well, a year ago we speculated that the Wheeler
Deposit would be big. Wheeler has now completed a year of
drilling and we know it is going to be big. The interesting thing
is that Hathor is trading at a bigger market cap than Denison.
Hathor doesn't have a producing mine. It doesn't own access to a
mill; Denison does. So if you ask me, "Would you rather own
Hathor or Denison today?" I would rather own Denison. We have had
our win with Hathor. Cameco wants it, give it to them. And you
will probably see more upside with Denison.

If you want a high-risk play in the Athabasca Basin, you could
have bought
Fission Energy Corp. (FIS:TSX.V; FSSIF:OTCQX)
in the private placement or in the open market. I think
that to really grow the Hathor deposit, Fission does play a role
in there. That is a very high-risk play. It is exploration. It
doesn't have any cash flow.

So the three companies in the Athabasca Basin that should be
on your radar are: Denison Mines, Cameco Corp. and Fission
Energy.

Just like in the oil sands, you have two types of production.
Conventional production requires open pit or underground mining,
moving rock, taking it to a mill, crushing it and producing
yellow cake. In situ recovery (
ISR
) is a much cheaper cost of production. I think you are going to
see a consolidation within the U.S. near-term producers. Uranium
One Inc. (UUU:TSX) has been a very poor performer.
Uranium Energy Corp (UEC:NYSE.A)
is on the Casey Next Ten list, and also on the Ten Bagger
List.
Uranerz Energy Corp. (URZ:TSX; URZ:NYSE.A)
,
Ur-Energy Inc. (URG:NYSE.A; URE:TSX)
and
Strathmore Minerals Corp. (STM:TSX;
STHJF:OTCQX)
are the players. If I was a person looking to invest in the
concept that there will be a consolidation within the ISR in the
U.S., I would look at owning Uranium Energy, Uranerz Energy and
Ur-Energy. I think Ur-Energy and Uranerz are potential takeover
candidates. Uranium Energy Corp (
UEC
), led by Amir Adnani, has been a successful low-cost producer,
and the company that has executed its business plan in the U.S.
on the time schedules they said they would. Other companies have
not.

Uranium Energy is a Casey Free Ride. We have recommended the
company a few times and have taken profits a few times. CEO Amir
Adnani has done everything he said he would. So if there is a
major market correction within the next six months, I would love
to own Amir at $1-1.25. It is hovering between $2.80-2.25. We are
in a trading range.

I would stay away from uranium in Australia right now because
of the politics. It is a massive area, just like Kazakhstan. But
the companies there have horrible structures, and they are still
very expensive. Africa is a lower grade, but the problem there is
high energy costs, high capex. I would stay away from there also.
We are also not going to be recommending any uranium in Europe
right now.

Unconventional Oil and Gas

Unconventional shale oil and gas is the biggest story in the
oil and gas sector in the last 10 years. It really was a game
changer. In the U.S., you had the Haynesville, Marcellus, the
Bakken, all of these areas that got a lot of attention from the
market and with that comes the NGOs and the protestors and all
the misinformation. But the fact is, the publicity will make it
harder to produce these fields. Recent moratoriums show that
politicians will go with the squeakiest wheel even though they
are not listening to the science. A few years ago, we went
through this with the coal bed methane sector. That is a much
shallower drilling, much closer to the water reservoirs, and
shale is much deeper. So the science proves that it is going to
be OK, but you have to go through the education and regulation
process.

I think your big upside is going to be in new areas. Remember
Cuadrilla Resources Ltd., which was a big win for our Casey
subscribers? It just found over 200 trillion cubic feet under the
Lancashire Basin, which will be enough gas for all of the United
Kingdom for many decades. Look at management teams that have done
this before and know the technology. Look for companies with
major cash and watch what the insiders are buying. They are not
just promoters standing there talking about it.
Tag Oil Ltd. (TAO:TSX.V)
is spending $100M in New Zealand and
East West Petroleum Corp. (EW:TSX.V)
is bringing in a big Serbian company to develop its assets.
It has $0.36/share cash, and insiders are buying. It has 1
million acres in Romania that look pretty interesting. That is
what you want: management teams who own the stock, but use other
people's money.

High-Impact Exploration Plays

Pay attention to
ShaMaran Petroleum (
CVE
)
in Kurdistan. It's a Cash Box. I think buying this under
$0.45 is a pretty interesting buy, very high risk, but they are
high-impact wells. My biggest disappointment right now is in
Indonesia.
Niko Resources Ltd. (NKO:TSX)
is drilling a third of the world's high impact wells. It
has major partners and it is a very smart group. I think you can
get this one under $45 and be patient. It has been really
oversold and it got caught "bribing" in Pakistan to get
permits.

We have talked about and bought and sold
Africa Oil Corp. (AOI:TSX.V)
three times. As things get cheaper, you'll be able to get
Africa Oil a bit cheaper. Remember as companies get closer to
drilling a well, the stock will go up and you want to take
profits. The highest-risk story is
Horn Petroleum Corp. (HRN:TSX)
. It is a Lundin company and it's either going to be a major win,
or it's going to go down significantly.

The largest onshore oil deposit in all of Europe is in
Albania. It is owned by a company called
Bankers Petroleum Ltd. (BNK:TSX)
. It is a multibillion dollar market cap company that has taken a
beating lately. It went from $9 to $3, but it earned just over
$10M in Q211. A company that is a much better buy with much more
upside in Albania than Bankers Petroleum is
Stream Oil and Gas Ltd. (SKO:TSX.V)
. It has a lot of hidden assets. It has made about four times
less money in Q211 than Bankers, but it's market cap is 20 times
less. It is a great value. It has a good management team, with a
lot of organic growth to come in the next 18 months. I own it; I
want to own more of it, and like it a lot.

North American Oil and Gas

Be patient. Don't rush into anything. I don't see gas prices
in North America changing substantially in the next year. The
next big thing here will be consolidation. Changes in Canadian
tax law have changed the game. You need to be north of 10,000
bbls in Canada to be taken out right now. Small, North American
oil and gas producers are going to have to find a way to grow
without increasing gas prices.

This was a summary of Marin Katusa's remarks. For the complete
audio collection of the Casey Research/Sprott Inc. Summit "When
Money Dies,"
click here
.

Investment Analyst
Marin Katusa
is the senior editor of
Casey's Energy Report
, Casey's Energy Opportunities and Casey's Energy Confidential.
He left a successful teaching career to pursue what has proven an
equally successful-and far more lucrative-career analyzing and
investing in junior resource companies. Katusa's insightful
research has made his subscribers a great deal of money. Using
his advanced mathematical skills, he created a diagnostic
resource market tool that analyzes and compares hundreds of
investment variables. Through his own investments and his work
with the Casey team, Katusa has established a network of
relationships with many of the key players in the junior resource
sector in Vancouver.

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DISCLOSURE:
1) The following companies mentioned in the interview are
sponsors of
The Energy Report:
Uranium Energy Corp., Uranerz Energy Corp., Fission Energy
Corp., Ram Power Corp., Royal Dutch Shell PLC and Strathmore
Minerals Corp.
2) Marin Katusa: I personally and/or my family own shares of the
following companies mentioned in this interview: Nevada
Geothermal Corp., East West Petroleum Corp. and Stream Oil and
Gas Ltd. I personally and/or my family am paid by the following
companies mentioned in this interview: None.

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